Chapter 8 Redefining development: the way forward

The preceding chapters highlight key opportunities to reduce disaster risks and facilitate implementation of the Hyogo Framework for Action (HFA). This collected evidence allows decision-makers and their constituents to quantify the costs and benefits of investments in disaster risk management (DRM), and weigh the trade-offs between action and inaction. Fundamentally, the challenge is not to protect development, but to use it to address the underlying risk drivers.

Strategic investments must be taken, often with uncertainty and incomplete information, and this report makes a compelling case for action in four areas.

1. Addressing global risk drivers

2. Taking responsibility for risks

3. Leveraging existing development instruments

4. Strengthening risk governance capacities

8.1 Address global risk drivers

Primary responsibility for reducing
disaster risks rests with individual
countries, but progress also depends
on international cooperation to
address climate change and
support adaptation, particularly in
developing countries where risk is
concentrated. In highly vulnerable,
low-income countries, DRM and
adaptation financing should be
used to strengthen risk governance
capacities. This will leverage
mainstream development investment
and help meet the Millennium
Development Goals.

8.1.1 Invest in risk governance for highly vulnerable countries

There is a group of vulnerable low-income
countries whose development paths are
diverging from those of OECD countries
and other low- and middle-income countries.
Major development investments are needed to
assist these countries to address the structural
causes of poverty, upgrade informal settlements,
build risk-reducing infrastructure, improve
natural resource management and strengthen
governance at all levels. These are indispensible
conditions for improving risk governance
capacities, including those needed for climate
change adaptation.

Chapter 2 illustrated that economic
development generally increases hazard
exposure. A country’s ability to develop with
accompanying reductions in vulnerability is
therefore critical to managing and reducing
disaster risk. However, there will always be
trade-offs between economic growth and risk
reduction. For example, tourism development
may generate employment and foreign exchange,
but if not well planned and managed, it may
increase both agricultural and hydrological
drought risks and lead to the degradation of
hazard-regulating coastal ecosystems. Similarly,
policies designed to increase certain agricultural
exports may overexploit water resources and
concentrate drought risks among subsistence
farmers.

Investment in strengthening governance is
therefore particularly important. Countries with
effective institutions, low levels of corruption
and strong accountability will have a far greater
capacity to address underlying risk drivers. High
GDP per capita alone does not guarantee strong
risk governance. Countries whose economies
depend on energy exports, for example, are
often characterized by high GDP per capita but
weak risk governance (DARA, 2011

). This was one of the largest annual
increases ever recorded, despite the growing
momentum to adopt low-carbon energies and
technologies in a number of countries and
sectors. This trend must be reversed. Mitigating
climate change is one of the few means by which
the frequency and intensity of certain physical
hazards can be reduced.

As highlighted in GAR09, the primary means
to mitigate climate change is for countries to
adopt low-carbon development paths. With the
exception of large, rapidly growing economies
such as China, India and Brazil, most lowand
middle-income countries make small
contributions to the global carbon footprint,
meaning that climate change mitigation is
largely out of their hands. These countries have
contributed least to climate change but already
have the greatest difficulty addressing existing disaster risks. As those risks become magnified by climate change and increasing climate variability, these countries will have even greater difficulty managing disaster impacts.

In major greenhouse gas-emitting countries, climate change mitigation can also provide other important risk reduction benefits. For example, urban and regional development can be planned in a way that reduces flood risk and transportation-related CO2 emissions. The UN-Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (UN-REDD) has been specifically designed to reduce emissions while simultaneously regulating hazards and supporting rural livelihoods and ecosystems.

8.1.3 Capitalize on political momentum for adaptation

Climate change adaptation is one issue on which the UNFCCC Parties made significant progress in 2010. At COP 16 in December 2010, the Cancún Adaptation Framework was adopted, inviting governments to link their implementation of climate change adaptation to other policies and processes, including the HFA. The Green Climate Fund was also established to provide direct financing for adaptation to developing countries. Given that most adaptation programming has been indistinguishable from DRM, these agreements will potentially increase the resources available for risk reduction in general.

There is growing momentum towards the integration of climate change adaptation and DRM into national development planning and investment. However, in most countries, institutional and programme mechanisms are managed separately and are only weakly coordinated. Both DRM and adaptation need to be integrated into national development planning and investment, local governance should be strengthened, and partnerships with civil society facilitated.

Additional resources for climate change adaptation and for DRM should be used to strengthen risk governance capacities including those accounting for disaster loss and assessing risk. These resources could then leverage the billions of development dollars that low- and middle-income countries invest each year to better address underlying risk drivers and reduce vulnerability. Such adaptation resources can provide the critical mass needed to address increasing risks in a context of climate change and provide a ‘no regrets’ strategy, particularly given the inherent uncertainty of future climate scenarios.

In addition, donors that provide budget support to low- and middle-income countries through overseas development assistance could learn from countries that are starting to factor disaster risk considerations into their public investment planning. They could then incorporate this learning into their dialogue with other recipient countries, in the context of OECD-DAC as one example.

8.2 Take responsibility for risk

Further progress in risk reduction will depend on governments taking decisive steps to explicitly recognize, and take full ownership of, and responsibility for, their stock of risk. This entails political risks, as it requires acknowledging the real costs and consequences of unmanaged risk. However, without owning their risks, countries remain effectively in denial, while experiencing unexpected disasters for which they are neither prepared nor able to manage. This continuously erodes their development potential, as the stream of recurrent losses from extensive disasters either absorbs public resources or is transferred to low-income households and communities.

Use planning and public investment systems
Include risk assessments
in national and sector
development planning
and investment

BUILD RISK GOVERNANCE CAPACITIES

Show political will
Place policy
responsibility for
DRM and climate
change adaptation in a
ministry with political
authority over national
development planning
and investment

Share power
Develop decentralized,
layered functions; use
principle of subsidiarity
and appropriate levels
of devolution including
budgets and to civil
society

Foster partnerships
Adopt a new culture of
public administration
supportive of local
initiatives and based on
partnerships between
government and civil
society

Be accountable
Ensure social
accountability
through increased
public information
and transparency; use
performance-based
budgeting and rewards

8.2.1 Account for disaster losses

The crucial first steps of taking responsibility for
risk involve the systematic recording of disaster
losses and impacts, and the institutionalization
of national disaster inventory systems. Countries
collect statistics on demography, employment,
economic activity and many other development
indicators to orient economic and other public
policies, but without accurate accounting
for disaster losses, such indicators form an
incomplete picture. Comprehensively recording
disaster losses and downstream impacts will
allow governments to measure and value the
costs of recurrent disasters and identify the
underlying drivers of risk. Unless a country can
calculate the cost of these losses, it is unlikely
to be able to justify significant investments in
DRM in the national budget.

Accounting for drought losses and impacts is
a particular gap, even in those countries that
have developed systems for recording losses
from other physical hazards. National disaster
inventory systems need to include criteria
for measuring drought losses, not only in
agriculture, but also in terms of impacts related
to livelihoods, health and other economic
sectors.

A number of countries have already established disaster inventory systems, many within the last few years. However, there remains significant room for improvement, as 90 percent of the countries that endorsed the HFA do not currently have functioning and institutionalized systems for recording disaster losses, and downstream impacts are currently only measured in isolated small-scale studies.

8.2.2 Quantify the risks

Countries not only need to know what they are losing, they must also estimate potential future losses for which they need to be prepared. A comprehensive probabilistic risk assessment that includes drought risk is the key to developing a cost-effective portfolio of disaster risk management measures. One method, using a ‘hybrid loss exceedence curve’, is highlighted in Chapter 5 of this report.

The capacity to apply probabilistic risk methodologies depends on accurate historical disaster loss data, and adequate capacity to assess vulnerability, for example by maintaining a functioning network of rainfall or seismic monitoring stations. This in turn requires strong institutional frameworks for hazard and risk assessment, which in many countries remain fragmented and poorly coordinated between a number of different and often competing institutions.

The formulation and adoption of international standards for disaster loss accounting and risk estimation may provide additional incentives for countries to take ownership of their risks. This could be especially important if such standards are used to prioritize financing for climate change adaptation and DRM.

Systematically accounting for losses and comprehensively assessing risks help governments categorize and stratify their stock of both extensive and intensive disaster risks. Cost–benefit and other analyses can then be used to assess economic and political costs and benefits of different prospective, corrective and compensatory risk management approaches. A well-balanced portfolio of DRM investments can produce powerful incentives for governments, including the enhanced quality and sustainability of public spending, increased public safety and business continuity, strengthened financial protection and fiscal stability, and avoidance of political fallout in the event of a catastrophic disaster.

A balanced portfolio is likely to include investments in prospective risk management, through effective planning for example. Corrective risk management is often less cost-effective but is necessary to address existing concentrations of risk, particularly in the case of critical services and facilities such as hospitals. Compensatory risk management may include a mix of different instruments, such as national contingency funds, contingent credit, insurance and reinsurance. These mechanisms contribute to providing financial liquidity and fiscal stability after disasters, as well as more predictable recovery and reconstruction. If risk-transfer measures are linked to specific requirements and criteria for risk reduction, they can provide a powerful incentive for other DRM investments.

At present, drought risk management currently relies on forecasting, early warning and compensatory measures, including relief and insurance. Access to early warning information that can inform decisions on what crops to plant and when, and insurance to buffer losses, can significantly reduce the vulnerability and increase the resilience of subsistence farmers. Compensatory measures play an important role, but their penetration in low- and middle-income countries is at present still incipient, and unless they are used strategically, they can reinforce poor resource management. These measures need to be complemented by prospective drought risk management to ensure that all new development takes into account current and anticipated future water availability.

As the March 2011 nuclear crisis in Japan shows, governments should also invest time and resources in anticipating emerging risks. In general, while there is widespread recognition of the potential magnitude of such risks, few
governments or international organizations
currently have policies to deal with them, and
even fewer have translated any such policy
into operational instruments. Developing
scenarios of ‘what might happen’ and preparing
appropriately means moving away from viewing
future risks merely as an extension of the
past. This is especially important with climate
change, which may trigger hazards that have no
historical antecedent in a particular location. It
involves developing anticipatory capacities and
tools such as scenario development and horizon
scanning, and having the adaptive capacity to
factor ‘what might happen’ scenarios into future
policies and plans. In turn, this will require
overcoming an aversion to risk and innovation
that often characterizes both the public sector
and international organizations.